Impact of Shares Buyback

 A share buyback has various impacts on a company's financial and other aspects.

• Boost in Share Price
  The buyback generally has a positive impact on share prices. The buyback of shares will increase stock price. The buyback would shrink the supply of shares in the market on one side. On the other hand, with an increase in the EPS, people would prefer to buy the stock leading to a sudden demand for such securities. With higher demand and lesser supply, the prices of the shares get boosted.
  
  
• Increase in Earnings Per Share
  With the buyback of shares, the total number of outstanding shares in the market reduces. With earnings remaining the same and the number of Equity Shares reducing, the Earning Per Share ratio shows a significant improvement.
  
  
• Improvement of Financial Statements
  The buyback of stock will also have a positive impact on the financial statements reflecting an improved return on asset and return on Equity with a reduction in assets by way of reduced cash holding used to buy back the stock and a reduction in the number of Equity shares with the repurchase of shares.
  
  
• Increase in Shareholder Value
  With the reduction in the number of equity shares in the market, the percentage of ownership held by each shareholder increases leading to an increase in the shareholder value.

Buy-back is a corporate action in which a company buys back its shares from the existing shareholders usually at a price higher than market price. When it buys back, the number of shares outstanding in the market reduces. A buy-back allows companies to invest in their own shares. Buy-back increases the proportion of shares a company owns by reducing the number of shares outstanding on the market.

Buybacks can be carried out in two ways:

• Companies buy back shares on the open market over an extended period of time.
  
• Shareholders may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of their shares within a certain time frame and at a premium to the current market price. This premium compensates investors for tendering their shares rather than holding on to them.

Most important reasons of Buyback of shares are –

1. Undervalued stock
   This is one of the main reasons why companies opt to buy back their shares. When the management feels that their stock is undervalued, they adopt the buyback route to rectify the stock price. The stock buyback reduces the number of shares in the market and thus gives a price boost to the remaining shares in the market.
   
   
2. Excess Cash with not many project opportunities
   A company with free reserves in hand but not many project opportunities would prefer to go for a buyback. The company would use the cash to reward the shareholders rather than keeping it idle in the bank account over the required amount.
   
   
3. Strengthen promoter holding in the company
   The company promoters can increase its stake in the company by forfeiting the buyback offer. This strengthens their hold over the company and acts as a defense strategy in the case of hostile takeovers.
   
   
4. To achieve optimum capital structure
   The capital structure of a company gets represented by its debt-equity ratio. Each industry has a different capital structure requirement. Some industries may not be suitable to rely on more debts, whereas some other business models may require large debts to run their business. Thus, as per the company requirement, a company may opt for buyback as a tool and repurchase its equity from the market to achieve an optimum capital structure.

Benefits of Listing on Stock Exchange

Listing is the formal admission of securities/shares of a company to the trading platform of the Stock Exchange. In Layman terms the company’s shares, debentures etc get listed on a particular Stock Exchange and investors can buy in a share also called Equity. So now that we have understanding of the term Listing, let’s get straight to the benefits.

There are several benefits of listing, out of which mostly are as follows –

1. Access to Capital for Growth – As shares in the Stock Exchange, it allows Management to raise larger sum of money. Most companies reach a level wherein additional capital is required to be infused to fund the company’s growth/expansion plans. Therefore, going public helps to overcome these constraints thereby enabling the company to increase its shareholder base which enhances the credibility.
   
   
2. Enhanced Visibility – Going public improves company’s Visibility, Trustworthiness and Reputation among institutions and the investors due to complying with various regulatory norms and ensuring transparency while conducting operations. A listed company attracts the attention of Hedge Funds, Mutual Funds and Institutional Investors.
   
   
3. Increase in Employee Morale – Increased Visibility and Tangibility at the same time improved Public Perception of the Organisation, thereby leads to reinforcement of employee’s value and morale.
   
   
4. Transparency and efficiency - Listing brings transparency and efficiency in the overall operations of the company. The board and management team of a listed company has accountability towards it shareholders. Further, listed companies also need to ensure timely compliance by providing information / disclosure to the Exchange / shareholders as laid down in the Listing Agreement or applicable guidelines.
   
   
5. Liquidity - Listing stimulates liquidity, giving shareholders the opportunity to realize the value of their investments. It allows shareholders to transact in the shares of the company, sharing risks as well as benefitting from any increase in the organizational value.

By complying with the Listing requirements, the operations of the Company becomes more Transparent and Investor Friendly, It further boosts up the Reputation and Prominence of the Company.

Private Equity

Private equity is an alternative investment class and consists of capital that is not listed on a public exchange. Private equity typically refers to investment funds, generally organized as limited partnerships, which buy and restructure private companies.

In other words, private equity is a kind of investment fund which is not quoted on a public exchange and is funded by independent or institutional investors who are capable of investing large sums of money for long period of time.

So now when we know that what the private equity is, let’s talk about few of its advantages:

1. Composed Investors: Private equity investors invest to make bigger profit in long run, they don’t look for short term a profit which acts as an added benefit for the company.
   
   
2. Huge funding amount: If the company is growing rapidly and all it needs to become the next big thing is a huge fund then private equity is the best option. It is the best of all the available options if you’re looking for a major investment before you make your next big step.
   
   
3. Selective & significant spend: Private equity firms are extremely selective and spend significant resource assessing the potential of companies, to understand the risks and how to mitigate them. This helps the company to re-evaluate every aspect of company which further helps in controlled growth of the organization.

Now since we already have a decent insight of private equity, why don’t we start talking about the types of equity funds already. Basically, private equity can be broadly classified into the following categories:

1. Venture Capital: Venture capital is a type of private equity fund which is provided by venture capital firms to the startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth. Venture capital generally comes from well-off investors, investment banks and any other financial institutions.
   
   
2. Leveraged Buyout (LBO): A leveraged buyout (LBO) is one company’s acquisition of another company using a significant amount of borrowed money to meet the cost of acquisition. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.
   
   
3. Distressed Private Equity: In distressed private equity, firms invest in troubled companies’ Debt or Equity to take control of the companies during bankruptcy or restructuring processes, turn the companies around, and eventually sell them or take them public.

Delisting

What is Delisting

The term “delisting” of securities means removal of securities of a listed company from a stock exchange where it is traded on a permanent basis. As a consequence of delisting, the securities of that company would no longer be traded at that stock exchange.

Delisting of securities may be compulsory or voluntary. Let’s know how different they are from each other. in compulsory delisting securities are removed from a stock exchange as a penal measure for not making submissions/complying with various requirements set out in the Listing agreement within the prescribed time frames whereas in voluntary delisting, company itself decides to remove its securities form stock exchange the securities of a company whereas

Now let’s see why companies voluntarily delist their securities. There might be number of reasons to delist but here are three main reasons of voluntary delisting:

1. Delay in strategic business decisions:

Due to the mandate of taking shareholders approval, the important strategic business decisions are often delayed which results in several adversities to the company which further forces the company to delist their securities from stock market.

2. Annual listing fee turns out to be a significant cost:

When benefits that the company is getting by listing its securities are not very much when compared to the amount it is annually paying to stay listed then the fee turns out to be a burden on the company and the company finally delists the securities from stock market.

3. Other costs of being a public entity:

Several costs like cost of reporting, audit & compliance costs might be high and albeit unnecessary to the company. And when the company is still not ready (or not in such conditions) to bear such costs then it decides to delist their securities.

The promoters have to comply with the procedural requirements as stated in SEBI (Delisting of Equity Shares) Regulations, 2009 in order to delist the equity shares,

Business Valuation and its benefits

A business valuation will provide you with an accurate estimate of your company's value in the current market. This is a requirement for mergers and acquisition, while also being a great way to strategize for future business succession planning.

Business valuation is as important to your business as to your body is your regular health check-ups. Valuation of your business not only keeps you up-to-date with the health of your business but also keeps you ready for many opportunities that you may come across and miss if you’re not aware about the value of your business.

So, if you’re looking for the reason why you should get the valuation of your business done or what are the benefits that you can get if you already know the value of your business, you’re at the right place. Here are the few of very important benefits of business valuation:

1. Greater Knowledge of Company Assets
Business valuation helps you in knowing accurate value of the assets that your business owns which in turn helps you in obtaining insurance covers and know how much you need to reinvest which further makes your financial planning easier and much more cost effective.

2. Broader Understanding of Company Resale Value
Overall valuation of your business also helps you know the resale value of your company which further helps you in negotiating better while you sell your business. If you’re planning to sell your business in the coming future, the regular valuation of the business will definitely help you in increasing the resale value of the company.

3. Higher Bargaining Power During Mergers/Acquisitions
When you know the value of your company, you won’t let the biggies acquire your company for less than what its worth. And while merging with others you’ll know what percentage of share you need to ask for. Without knowing the value of your company you might end up agreeing to a bad deal. Regular valuation helps you keep track of growth during previous years and also the worth of your company which certainly ensures you that good deals don’t slip off your hands and bad deals don’t fall in your bag.

4. Exposes the business to more investors
When seeking for investment, it is always good to have some accurate data to prove your points. While you’re trying to convince your potential investors to invest, the accurate figures may convince more than your words. Regular valuation helps the investors to understand the worth of your company and also the potential growth in future. Also it is easier to gain the attention of more investors when they can see that investing in your company will be a good decision.

Business valuation is not just about the accurate numbers. Those accurate numbers may help you in knowing the potential future growth, worth of the company and even help you in gaining access to more potential investors. So, do not forget to know the worth of your businesses because only when you know where you are, you can reach where you want to be.

Ineligibility of IPs for submitting EOIs

On 01.06.2021, IBBI published a circular bearing File No. IP-12011/1/2020-IBBI wherein an Insolvency Professional ("IP") may submit his EOI to be included in the panel selected by the NCLT for allotment of assignments. To be included in this panel, the IP must submit the EOI on the IBBI web-portal.

However, IPs who did not have a valid AFA till 31.12.2021 will not be allowed to submit the EOI.

Error message: "You are not eligible to apply for EOI as your AFA is not valid till 31-DEC-2021"

As per the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2019, u/r 12A(3), “an application for renewal of an authorisation for assignment shall be made any time before the date of expiry of the authorisation, but not earlier than forty-five days before the date of expiry of the authorisation.” The same has been adopted by all 3 IPAs.

Hence, IPs whose AFA is expiring during July-December 2021, will not be allowed to submit the EOI on the IBBI web portal. In fact, IPs whose AFA renewal falls during July-December every year will never be eligible to submit their EOIs for the June-December cycle. The same happens if an AFA renewal falls during February-June where he will be ineligible to submit the EOI for the January-June cycle.

As of 06.06.2021, there are 1,452 IPs registered with the Board whose AFA expires during 01.07.2021 to 30.12.2021. As per IBBI rules, these IPs will not be able to submit their EOI for the July-December cycle.

AFA expiring on	No. of IPs
Jul 2021	44
Aug 2021	43
Sep 2021	32
Oct 2021	28
Nov 2021	300
01.12.2021-30.12.2021	1005
Sub-total	1,452
31.12.2021	18
Jan 2021	190
Feb 2021	129
Mar 2021	125
Apr 2021	177
May 2021	109
Jun 2021	13
Total	2,213

U/r 7A of the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (“IP Regulations”), an IP needs to hold “a valid authorisation for assignment on the date of such acceptance or commencement of such assignment, as the case may be.” The EOI is a submission for acceptance of a potential assignment and my AFA is valid as on the date of submission of such acceptance. Hence there should not be any problem to be considered eligible to submit the EOI.

As per the Press Release dt. 23.07.2019 bearing No. IBBI/PR/2019/19, Para 2(b), the AFA "enables an individual to seek registration as an IP even when he is in employment". Hindering in obtaining assignments for never the intent of the AFA. Many practicing IPs have left full time employment to practice the Insolvency profession and AFA is renewed as a matter of routine as per prescribed timelines. Denying opportunities due to such bureaucratic red-tapism, is against the spirit and concept of the profession.

We request IBBI to rectify this error which threatens our livelihood and allow the IPs, including myself, bearing a valid AFA to apply for the EOI. In all fairness, the NCLT may check the AFA of an IP at the time of allotment of an assignment, which is freely accessible on the IBBI website.